Succession planning works best when roles and responsibilities are formally defined. Most boards assign succession oversight to a nominating, governance or compensation committee, while others create a special ad hoc committee. The process is most effectively led by a non-executive, independent board member, thereby maintaining objectivity.

Clarity is king. Research by PricewaterhouseCoopers¹ (PwC) recommends that boards:

• Define the full board's role versus committee responsibilities
• Establish clear decision-making authority
• Determine the frequency of succession planning on the board agenda
• Clarify the current CEO's role in the process, providing input while ensuring the ultimate authority of the board
• Create guidelines for when and how to involve external advisors

Codifying the CEO succession process creates greater alignment between the board and CEO, avoids awkward conversations with an incumbent CEO when transition is imminent, and avoids conflict of interest for the CEO. Such a disciplined approach can cover a range of contingencies before the first day of tenure.

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Initiating CEO succession before the CEO’s first day best aligns the board and CEO, minimizing conflicts of interest for the CEO during their tenure.

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A key metric for the new CEO is to develop internal, competitive candidates for succession with at least twice annual reports on progress. This can be a challenge in a company with few roles leading naturally to CEO. In addition, some industries have a strong bias toward a functional, technical or operating background seen as ideal for CEO candidate development. If possible, it is important for the board to maintain multiple paths to succession, requiring foresight, active planning and creativity.

For mid-market companies, this means incorporating succession debate and ideally, candidate reviews into regular board meetings. PwC recommendations align with best practice among those companies proactive in succession: a clear cadence for discussions by the board, and CEO input at both board and executive sessions.

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Companies with systematic and continuous succession planning generate total shareholder returns three times higher than companies with delayed succession planning.

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Step Two: Overcoming a shallow internal talent pool

The single most important principle in planning is never to treat it as a one-time event. Research by Harvard Business Review^2,3 (HBR) emphasizes succession planning as an ongoing process integrated with broader talent management and leadership development. Boston Consulting Group finds that companies with systematic and continuous succession planning generate total shareholder returns three times higher than companies with poorly performing CEOs or delayed succession planning.

Mid-market companies face a fundamental challenge not faced by their larger counterparts; with fewer executive positions to prepare an individual for consideration, intentional leadership development nurtures more ‘well-rounded’ executives for the CEO role.

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In recruiting board members, it is important to have seasoned executives able and prepared to mentor executives who are serious CEO succession candidates.

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For this, the following approaches are particularly effective:

• Rotational roles: these can be an effective way to prepare functional C-suite leaders for the broader challenges of the CEO role. With proper oversight from the CEO and board, succession candidates can be placed into roles not typically aligned with their background — for example, having IT report to a CFO or Facilities report to a CHRO. When the business model allows for these rotations without compromising competitive performance, they help develop more well-rounded, enterprise-ready leaders.
• Leverage organizational design to provide P&L experience: a well-planned and supported functional lead, such as General Counsel, or Chief Information Officer can lead a secondary profit center, with this responsibility and operational expertise strengthening a candidate’s credentials for succession.
• Recruit with CEO succession in mind: when hiring functional leaders, such as human resources, finance, legal, and others, strive to consider candidates broader than their functional competency, particularly C-suite members with an operational background. While not required for functional leadership, it can lead to a broader operating role and potential CEO succession. When looking externally, set an expectation that advancement in the organization requires rotations through other functional areas to become a CEO contender.
• Actively cultivate high potential candidates: keep succession in mind when assigning special projects. Acceleration in the business cycle requires all companies in this competitive climate to address new challenges. Special initiatives require interdisciplinary leadership teams, so assignment to such a team is a development opportunity for a competitive CEO successor.
• Board engagement is pivotal: in recruiting board members, it is important to have seasoned executives able and prepared to mentor executives who are serious CEO succession candidates.
• Board appointment: HBR research aligns with best practice in appointing potential CEO successors to the board. This both helps to prepare individuals for the CEO role, while giving board members direct exposure to potential candidates. If not feasible, regular presentations and attendance at board meetings provides similar benefits.
   

Step Three: Consider external options

Unlike Fortune 500 companies that can dedicate entire HR teams to succession planning, mid-market companies operate with constrained resources.

In this environment, succession planning, which may not yield visible results for years, is frequently deprioritized in favor of more immediate concerns. As a result, even with a commitment to succession, broader options need to be considered. Monitoring external talent both widens the net for potential recruits and enables leaders to calibrate the strength of internal candidates.

• External benchmarking: regularly, ideally every two years, companies should externally benchmark internal candidates against external talent. This reality check informs development priorities and ensures internal candidates remain competitive against external alternatives.
• Know when and why to hire external candidates: many companies prefer internal successors due to cultural fit and institutional knowledge, but research shows mixed results on the internal versus external question. HBR analysis finds that companies often engage in excessive outside hiring when internal candidates would perform better, while some companies fail to consider external candidates, losing out on valuable fresh perspectives.

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Companies often engage in excessive outside hiring when internal candidates would perform better, while some companies fail to consider external candidates, losing out on valuable fresh perspectives.

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The key is genuine optionality: truly considering both internal and external candidates, and making the selection based on strategic fit rather than predetermined preference. For mid-market companies, this might mean:

• Conducting a discrete external search even when strong internal candidates exist
• Being honest about whether internal candidates have been sufficiently developed
• Recognizing when external expertise is essential for strategic pivots
   

Strategic scenario preparation

Since not all events are planned, the board needs a range of contingency plans to be ready for succession planning across three timelines, underscored by Bain & Company:

1. Emergency succession planning: every company needs a plan for unexpected CEO departure due to illness, accident, or sudden resignation. For this, identify interim candidates, such as the CFO, COO, or other senior executives, who can step in quickly with minimal disruption. These emergency candidates need prior time with the board to understand the business deeply enough to provide leadership stability, while a longer-term solution is developed.
2. Near-term transition planning: as companies emerge from crises or when CEO performance issues arise, boards must evaluate whether leadership changes are needed within 12-18 months. Assess whether the current CEO's strengths align with immediate recovery needs, or if different capabilities are required for the next growth phase.
3. Long-term succession planning: preparing for transition three or more years in advance allows time for candidate development, board alignment, and organizational preparation. Even if transition isn’t expected, boards should regularly update these plans, because alignment around succession typically takes at least a year.
    

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Effective CEO succession is entirely based on the free will of sophisticated executives, and is therefore a complex, nuanced pursuit often fraught with unforeseen challenges, even for skilled boards committed to a rigorous approach.

Since 1946, Boyden has been consulting with small and mid-market clients on this matter, partnering with boards to prepare for emergency, mid-term and long-term CEO succession.

 

 

^{1 https://www.pwc.com/us/en/services/governance-insights-center/library/ceo-succession-planning.html
2 https://hbr.org/topic/subject/succession-planning
3 https://hbr.org/2025/07/where-traditional-succession-planning-falls-short}